P2P Lending – How it works? Concept and Regulation

P2P lending is now regularized by RBI.P2P lending is easy and fastest way to lend and borrow loans. P2P is also called as peer to peer lending. It is a method of lending money between two individual entities.

Let’s say you are in desperate need of money. It may be due to setting up a new business, marriage, medical emergency or anything else. What do you do? You generally talk to your friend or relative for the money or you approach a bank and take a personal loan – right? Well, what happens if both options do not work for you? P2P lending is alternative to both these options.

How P2P Lending works?

As discussed in above section for getting a loan from your friends and relative you approach them. To get a loan from the bank you approach the bank. In P2P lending you need to approach P2P lending platform for getting a loan. A P2P platform is a market place like Flipkart and Amazon for getting a loan. You need to follow steps given below on this lending platform.

Step -1 – At first instance, you need to register on the p2p platform as borrower or lender. At the time of registration, you need to provide personal, professional and financial information.

Step-2 – P2P platform verifies the trustworthiness of this information by checking proof. This is in line with KYC verification norms.

Step-3- Once verification is completed lender or borrower a can publish their listing on the site mentioning information like the purpose of the loan, interest rate etc.

Step-4 – Borrower or lenders can contact each other. They can also see documentary proof before lending a loan

Step -5 – Loan tenure, a rate of interest and other terms and conditions are discussed between lender and borrower.

Step-6 – On agreement of both lender and borrower disbursement of loan happens. During disbursement, P2P platform plays an important role in making loan agreement and money transfer from lender to the borrower.

Hi, I am Raviraj. I am passionate about money matters and finance. I have 12 years of rich experience in the field of financial planning, Investments & Insurance. I have written 1000+ article on this blog. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.

Subscribe to Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.